Pakistan to offer $1 billion Eurobond this week

ISLAMABAD: Cash-strapped Pakistan will raise at least $1 billion from international debt markets in the next two days by Eurobonds offerings, a media report said today.

Finance Minister Ishaq Dar during his visit to the US will lead the Pakistani team to launch a Eurobond.

Pakistan has opted the easier but more expensive path of capital markets financing rather than implementing tough but necessary energy sector reforms and accessing the much cheaper financing available from international aid agencies, The Express Tribune reported.

"The bond will be priced on September 24 and is being underwritten by Citibank, Deutsche Bank and Standard Chartered Bank, which were appointed less than three weeks ago," it said.

The Eurobonds are expected to be of either five or 10-year maturities, or possibly both.

Based on the last issue, the interest rate is likely to be in the 7 per cent range.

By comparison, had the government implemented energy sector reforms, the country would have availed the same amount from the World Bank and Asian Development Bank (ADB) at a 2 per cent interest rate for a period of 25 years.

The launching of the Eurobond, the third global issue in less than two years, highlights the government's lack of commitment to structural reforms hampering economic growth, according to independent economists.

Although, the government had included $1 billion Eurobond in its annual budgetary estimates, it advanced the calendar and also decided to issue the sukuk.

International lenders' refusal to extend $1 billion in budgetary support before end of this month heightened the urgency to try luck in international debt markets.

The World Bank (WB), ADB and Japan have withheld approval of $1 billion loan after they questioned the government's commitment to reform the ailing energy sector.

The government's inability to implement promised reforms led to delay of approval of the loan, which was originally planned for April this year.

Under the Development Policy Credit-II, the WB was supposed to give $500 million in loan, the ADB $400 million loan and Japan $100 million in grant.

Earlier, in March last year, the government raised $2 billion by floating five and ten year dollar-denominated bonds at interest rates ranging between 7.25 per cent and 8.25 per cent.

In the second attempt, the government issued five-year $1 billion Ijara-Sukuk bonds at 6.75 per cent.